The ‘Blockchain 50’ public companies on the Shanghai Index are noticeably quiet about blockchain in their mid-year reports. None have reported any real use cases thus far.
BLOCKCHAIN’S BEEN A BUST FOR MANY OF THE PUBLIC COMPANIES THAT EMBRACED IT.
Remember the Blockchain 50 Index pioneered by China’s Shenzhen Stock Exchange at the beginning of 2020? The index comprises the top 50 public firms that claim to be affiliated with blockchain. It harkens back to the beginning of the year when China had announced its blockchain ambitions and companies had rushed to jump on the bandwagon, to be “on the chain.”
Now that three quarters of 2020 has passed, an analysis of these firms’ financial reports, though a few months’ delayed, reveals that many pro-blockchain firms are conspicuously quiet about their blockchain efforts. (There was one exception, a company that reported a 100% decrease in its blockchain revenue, which meant its blockchain revenue went to 0.
This week’s da bing looks into how Chinese public companies are struggling to remain relevant in the blockchain world.
There are no real use cases
Perhaps the strongest evidence against these so-called blockchain companies is the lack of real use cases.
According to Security Daily, among the 262 public companies self-categorized as “blockchain companies,” only 23 mentioned live blockchain use cases. Most of these use cases are in the public sector, supply-chain finance, healthcare, and digital rights. These use cases tend to be on a small scale and frankly can be deployed without blockchain technology, and instead use a distributed database.
Of course, most of these companies are not blockchain-native companies; their bread and butter is in traditional industries such as e-commerce, cloud, software, media, and even electronics. When these firms entered the blockchain world, they had to explore use cases that were in synergy with their main business, which is easier said and done. As a result, most companies kept blockchain as a “strategic initiative,” a nice way to say “it’s not core to our business.”
China is not devoid of blockchain use cases. On the contrary, over 11 provinces have started grants supporting blockchain companies, with many focusing on blockchain-powered civil services. So who benefits from that free RMB?
The answer is blockchain-native startups and big tech companies.
Blockchain-native firms such as the Beijing-based Red Date made a splash when China’s Blockchain Service Network (BSN) debuted. As the sole tech provider behind BSN, Red Date became the center of attention because no one had heard of it. Many observers wondered: who are they and where do they come from?
But its obscurity might be the beauty of blockchain. Since the field is still new, startups that have no legacy reputation can enter the field if their solution works. In the case of BSN, it required a tech provider that not only understands the sensitivities of China, but also has experience with international public blockchains such as Cosmos and Chainlink.
This type of in-depth knowledge can hardly be found in public companies that treat blockchain as a side project.
Big tech companies such as Alibaba and Tencent are still in the hunt. They both have a vested interest in blockchain because the technology directly correlates with certain revenue streams, such as cloud computing. (Hosting blockchain networks in the cloud is lucrative.
But more importantly, because these tech giants have infiltrated every aspect of Chinese life thanks to powerful apps such as WeChat and Alipay, they can easily experiment with blockchain without looking too desperate to get on the chain. Ant Group, Alibaba’s now-independent Fintech arm, has gone even further by unleashing its own public blockchain AntChain.
At its core, governments trust these blockchain startups and big tech to experiment with blockchain because of the talent behind them. Despite Blockchain 50’s rhetoric to build use cases on top of the blockchain, they lack the human resources to actually build anything interesting. Like many other countries, China is at the earliest stage of exploring blockchain.